Question content area top

Part $1$

Discuss the differences between lean accounting and traditional cost accounting.

Question content area bottom

Part $1$

A$.$

Lean accounting costs the entire value stream instead of individual products. Rework$$ costs, unused capacity$$ costs, and common costs that cannot be reasonably assigned to value streams are excluded from value stream costs. Traditional accounting systems cost individual products and separate product costs from$$ selling, general, and administrative costs. In$$ addition, many lean accounting systems store material costs on the balance sheet until the products using the material are$$ sold, rather than expensing them in the period they are purchased. sheet until the products using the material are sold.

B$.$

Traditional accounting systems cost the entire value stream instead of individual products. Rework$$ costs, unused capacity$$ costs, and common costs that cannot be reasonably assigned to value streams are excluded from value stream costs. Lean accounting costs individual products and separate product costs from$$ selling, general, and administrative costs. In$$ addition, many lean accounting systems store material costs on the balance sheet until the products using the material are$$ sold, rather than expensing them in the period they are purchased.

C$.$

Both lean accounting and traditional accounting cost individual products and separate product costs from$$ selling, general, and administrative costs. The difference is that rework$$ costs, unused capacity$$ costs, and common costs that cannot be reasonably assigned to value streams are excluded from value stream costs and added to the lean accounting method. In$$ addition, many lean accounting systems expense material costs in the period they are$$ purchased, rather than storing them on the balance sheet until the products using the material are sold.

D$.$

Traditional accounting systems cost individual products and separate product costs from$$ selling, general, and administrative costs. Lean accounting costs the entire value stream instead of individual products. Rework$$ costs, unused capacity$$ costs, and common costs that cannot be reasonably assigned to value streams are excluded from value stream costs. In$$ addition, many lean accounting systems expense material costs in the period they are$$ purchased, rather than storing them on the balance sheet until the products using the material are sold.